I am still a fan of AdSense as a way of determining a baseline income potential for a site, but I don't see it as a long-term viable business model for most small publishers. Why?

Smart Pricing (or Maybe Dumb Publishing?)

I friend told me how much he made from AdSense a year ago, and in spite of increasing his network pageviews 200% since then his earnings this month are 10% lower than they were a year ago.

And Google still does a sloppy job policing their partner network. What happens if their editorial review costs increase. What does that do to the percent of ad income Google needs to keep to keep growing?

A Glut of Publishing:

It is getting easier and easier to publish online. The number of people writing is probably growing at a faster rate than the number (and income of) of people reading, which means you will have to be more compelling and put more effort into your content and marketing if you want to keep your pageviews up.

And Google has been placing more weight on authoritative domains, which is squeezing many small players out of ranking in the search results.

Newspaper & Magazine Archives: More Glut:

As business deals are worked out, and trusted archived content comes online, many business models based on AdSense spam will lose a large portion of their traffic to mainstream media companies that are not currently fully leveraging their archives.

If Google bought YouTube how long before they buy Olive Software or create a similar technology?

Frothy Ad Market:

I just saw a big, ugly, and obtrusive AOL ad on Amazon.com's home page. If people are buying general untargeted graphic ads on the largest retail site they must be overpaying for it.

A Lack of Competition:

Some of the executives of Yahoo!'s Publisher program recently announced they were quiting, and with Google's lead in the contextual ad space with virtually no competition, I have to take that as a bad sign for Yahoo!, and for independent publishers in general.

Google's General Arrogance:

Today many publishers noticed bright Google logos in their ad boxes inviting readers to sign up for AdSense.

Potential Text Ad Blindness:

People have learned to ignore banners and common ad locations. How long until people learn to ignore common AdSense formats, especially as the ads appear so prevalently on so many sites? What if people become more receptive to identifying ads (even in the content area)?

Not Worth It:

Add all those up and it gets a bit bleak looking to AdSense as anything more than a baseline estimate for effortless income or a backfill for unsold inventory.

What if instead of monetizing every page, niche publishers used most of their pages to keep attention and link equity flowing their way, and then just monetized targeted high value sections of their sites using well integrated affiliate offers and/or selling direct products?

If you create a site about information retrieval and see medical ads on it that might be a good sign there is a bunch of money in that market.

• Google's internal AdSense optimization is based on earnings potential. If they give an ad excessive exposure, even on off topic sites, it probably means that the ads stand a good chance of being expensive.

• If advertisers are buying expensive clicks from off topic sites then they got plenty of budget to blow through.

I am not saying that off topic ads are a great thing long-term, but they might make for an easy way to follow the money trail. If you have any interest in the ad topic then create a few pages about it and test the earnings potential. You might also consider joining a related affiliate program and buying cheap traffic through other ad networks, such as AdBrite.

In case you think this off targeted advertising is a short term condition, consider the following data points...

Recent market size:

The most startling fact about 2002 is that the combined profits for the ten drug companies in the Fortune 500 ($35.9 billion) were more than the profits for all the other 490 businesses put together ($33.7 billion). - Marcia Angell

Future growth prospects:

If medical spending rises to 25% of gross domestic product by 2030, as many economists expect, health care's share of jobs could grow to 15% or 16% of the labor market from today's 12%, based on historical patterns.

Such a shift in employment would require health care to be the single biggest creator of jobs in the economy for the foreseeable future. And while the U.S. could in theory afford to spend 25% of GDP on health care, it's hard to imagine a world in which our children have to choose between working for the local hospital or the local health insurer. - Business Week

Drug companies are off manufacturing diseases to make up for our poor rushed choices and hollow lifestyles:

75 million Americans may have something called metabolic syndrome. How Big Pharma turned obesity into a disease – then invented the drugs to cure it. - Wired

Drug companies sponsor research

The Center for Science in the Public Interest found that 96 percent of the industry-funded efficacy studies of drugs like Prozac, Zoloft, and Paxil in children were positive. That compares to just 63 percent of independently funded studies published in medical journals.
...
If one looks at just published clinical trials that contained a placebo-controlled arm, industry-funded clinicians reported the drugs were effective in 9 out of 10 cases. But among researchers not funded by industry, only 5 out of 9 reported positive results, which is surprisingly low given that other studies have shown that medical journals are biased toward publishing positive reports. By comparison, just 3 of 15 FDA reviews of pediatric antidepressant trials, many of which have not been published, were positive. - Center for Science in the Public Interest

Drug companies market directly to consumers via shady prescribe yourself websites.

And if all the above wasn't scary enough, consider the fraud baked right into the system:

The Justice Department has charged a former chief of the Food and Drug Administration with lying about his ownership of stock in companies regulated by the agency, according to media reports on Monday. The government accused Lester Crawford with falsely reporting that he had sold stock in companies while he continued holding shares in firms governed by FDA rules, the Associated Press reported. - MarketWatch

This post topic has the ability to quickly get me steamrolled and a lot of hate, but I think advertisement clickthrough rate is something well worth considering before creating any website that is monetized via pay per click ads. I have recently launched a number of AdSense monetized sites and these are some of my early thoughts on factors affecting monetization and CTR.

Are there Any Ads? Are the Ads Relevant? Is There Any Search Volume?
If you search for Google and nobody is advertising for your targeted industry or phrase sets the opportunities to make money are going to be rather limited. The same holds true if the traffic volume is low or the bid prices are dirt. The Google Traffic Estimator Tool makes it pretty easy to get an estimate of the bid prices and AdWords click volume while the Google Keyword Tool lets you check the depth of competition quickly. You can also use Shawn's Google AdSense Sandbox to see how compelling and relevant ad offers are for a specific topic.

Signs of Desperation, Ignorance, or Stupidity
I am sure this category might get me a bit of heat, but I own one website that was getting about 400 pageviews a day about a specific topic. Adding a single page catering to some ignorant people in that vertical (one could assume a certain level of ignorance by their search queries - sorry but I can't give that term away) added 50 pageviews a day and doubled the ad clicks and earnings for the site.

Dumb or naive people are less likely to realize they are clicking paid ads when they land on your page.

What are some common signs of intelligence or lack of intelligence? Or signs of naiveness?

• topics for kids - they clearly are going to be operating on limited business experience and limited financial and business understanding, and thus may click click click without thinking anything of it. I have a site that caters to a broad field, but the page most focused on kid friendly searches has a 50% ad clickthrough rate, whereas the next best page is coming in at 18%, and the site averages around 10%.

• searching for things that do not exist - these are going to be easier to rank for than their official alternatives. These searches may be an indication of intelligence or lack of intelligence depending on vertical and query. From my limited experience, more frequently they will likely indicate a lack of intelligence, but it really depends on the reason WHY the market has yet to fill the demand.
• misspellings and misuse of language - I am a bad speller so I offer no hate here, but on average most misspelled queries come from people who are below average on the intelligence scale
• poor credit or lack of financial planning - sure we all go through ruts, but the average person looking for a payday loan is going to be less intelligent than the average person looking for a mortgage loan
• general topic - the average person searching for scientific information is going to be smarter than the average person searching for a personality on Fox News or American Idol.
• demographics - old and young people may not be clued into how the web works. Some other demographics may be more or less clued in. Many search queries may do a great deal to identify the gender, age group, or ethnicity of the searcher.
• traffic source - On average the average Google user is going to be smarter than the average MSN Search user, who is going to be smarter than the average free spyware download search accelerator searcher.
• query length and syntax - advanced search queries and specific long tail searches are most likely going to be from smarter searchers or searchers closer to purchasing.

Searches That Signify the Desire for Advertisements
Targeted buying searches and comparison searches may be searchers that are looking for just a bit more info before converting, perhaps through one of your ads.

Ad Integration
The more ads look like content the more they get clicked on. Default blue is a beautiful link color. Some people do well by placing images near their AdSense ads.

Quality and Quantity of Ad Alternatives
Content that is of amazing quality that solves the visitor's problems may make the ads look less appealing, although if it allows you to become the industry standard resource that additional distribution can more than pay for the added cost of creating real quality content.

If a page is a resource link list or has many alternative paths to leave the site outside of an ad click many people will take those paths.

Are the top SERPs dominated by real resources?
If the top results are quality informational PR7 .edu pages best of luck on the rankings front. You are going to need it ;)

If the top sites are cloaked pages or other sites that do not look like real resources it is easier to get your listing clicked on by crafting a quality page title and meta description.

Does Your Site Have Enough Authority?
As recently posted by Quadzilla, if you have authority it seems you can extend it out cross topic. If you lack link authority and age related trust it is an uphill battle to compete in Google.

How Much Commitment is Required to Buy?
Buying a home is a much more extensive and expensive process than buying a treadmill.

How Web Friendly is Your Product Offering?
Ads for physical books, heavy commodities or things like diamonds (which perhaps require some amount of trust to purchase) are going to go for far less than they are worth when compared to ads for items that fit the web nearly perfectly (take software or ebooks as examples).

I have not tested Google Adlinks on many of my sites much, but there are other sites that talk about me in threads.

I was sorta curious how Google picked "Aaron Wall SEO Book" as a link topic and wanted to see what ads they display for it.

I have so many relevancy points for those types of searches:

• I rank #1 for either phrase or them both together

• My conversion rate for those searches is amazing and I have Google Analytics enabled so they know how amazingly high the conversion rates are.
• If you search for either of those phrases (or the phrases together) I am at worst #2 on AdWords (am typically #1).
• I have AdSense content ads enabled with a wide variety of those types of terms in it and am nowhere near my daily budget on that ad campaign

and yet when I clicked that Aaron Wall SEO Book adlink I did not appear in the ad search results. I also clicked the SEO Inc. adlink and their ad was #9 for their own trademark name.

I realize to Google it is all just math, numbers, money-in-the-bank, yada, yada, but if it is wrong for competitors to use trademark terms in ad copy how wrong (and perhaps even a bit unethical really - since search engines want to push the bullshit ethics angle) is it for Google to create adlink searches using trademarked terms to drive them and potentially not list the trademark sites or any editorial search results?

Is that legitimate comparative advertising? What would Sony think if Google delivered Playstation adlinks that delivered ads for nothing but XBox games. What happens if Yahoo! sells a link named Google that leads to transexual porn ads? Where is the line drawn in the sand?

Is everyone that develops a legitimate brand forced into paying Google through the nose for Adlinks on their products or brands so they don't have Google flush their brand equity down the toilet?

I bet if you search around there are probably some interesting adlinks that are complete bait and switch on trademark terms. Is there any cases associated with the liability of doing that? Should there be?

I am a big believer in aggressive advertising, but is it deceptive for Google to use a trademark term in a link to drive a query to a bunch of ads that may have nothing to do with that topic?

How is this Google adlinks technique any better than typosquatting?

So I have been doing a bit of surfing around recently and I have been seeing Ford Explorer AdSense ads everywhere.

Are they bidding on a list of stop words or the letters of the alphabet perhaps? At $8 a click? Or what is up with those ads being everywhere? I thought the US auto industry was screwed? While GM is in the hurt locker it doesn't seem Ford is fairing much better.

By Google delivering those damn Explorer ads that are so far off target they are teaching site visitors to ignore the ads, and may be costing themselves and publishers a lot more than they realize. If people learn to ignore textual ads then funding good content production is much harder. If people can't afford to make good content then Google is going to be full of garbage.

I know I have read a number of times about how Google did not like when people bought off topic links. Do they think they are doing the web a favor by putting those Explorer ads on exceptionally off target websites? Where does the targeting end? Why is it legitimate to publish AdSense ads so far off topic if off topic links are bad?

Of course it would be ironic if the ads were behavioral and typing this post meant Ford ads for the next 5 years for me.